Finance⏱ 5 min read
How to Calculate VAT and Import Duty on Goods from Abroad
Buying from the US, EU, or Asia? Customs charges can add 25-40% to the purchase price. Here is exactly how import VAT, customs duty, and Royal Mail handling fees are calculated.
Since Brexit (January 2021), all goods arriving from the EU are now subject to the same customs rules as goods from the rest of the world. Many shoppers still discover this at the point of delivery.
When Import Charges Apply
Import VAT applies on ALL goods entering the UK
(Previously: goods under £15 from outside EU were exempt -- this ended in 2021)
Customs duty applies based on the commodity code and country of origin:
Below £135 in value: only import VAT (20%) applies
Above £135: import VAT (20%) + customs duty (0-12% depending on goods)
The threshold is the CUSTOMS VALUE:
= Item price + shipping cost + insurance (if applicable)
Example: US item $85 (approx £68), shipping $12 (approx £10):
Customs value = £68 + £10 = £78
Below £135 threshold: only VAT applies
VAT: £78 x 20% = £15.60
Above £135: Adding Customs Duty
Customs duty rate depends on the commodity:
Electronics (phones, laptops): 0%
Clothing: 12%
Shoes: 12-17%
Furniture: 0-6%
Toys: 4.7%
Books: 0%
Example: clothing item from US, customs value £200:
Customs duty: £200 x 12% = £24
Import VAT is calculated on: value + duty
VAT base: £200 + £24 = £224
Import VAT (20%): £224 x 20% = £44.80
Total charges: £24 + £44.80 = £68.80
Total cost: £200 item + £68.80 charges = £268.80
Effective mark-up: 34.4%
Handling Fees
Couriers and Royal Mail charge a handling fee to clear customs on your behalf:
Royal Mail (UK Mail): £8 clearance fee
DHL: £11-£13
FedEx: £12-£15
UPS: £11-£14
Parcelforce: £12-£16
This is in addition to the VAT and duty owed.
Full cost example (clothing, £200 customs value, via DHL):
Item: £200
Customs duty (12%): £24
Import VAT (20% on £224): £44.80
DHL handling fee: £12
Total additional: £80.80
Grand total: £280.80 (40.4% above purchase price)
IOSS and VAT-Registered Sellers
Many large retailers (Amazon, eBay, Etsy marketplace) now collect
import VAT at checkout for orders under £135 via IOSS
(Import One-Stop Shop) or equivalent schemes.
If VAT was collected at checkout (marked on invoice):
No further import VAT is due at delivery
No customs handling fee from Royal Mail/courier (for IOSS registered sellers)
For orders from smaller sellers not registered for IOSS:
VAT will be collected at delivery by the carrier
Plus the handling fee
Before ordering internationally:
Check if the seller is IOSS registered (many websites now indicate this)
If not, budget for: import VAT + handling fee (minimum £23.60 on any order)